Facts
- The Society of Lloyd’s (Society) held a collectible judgment from the 1990s against Lea Ward.
- In the 2000s, Society learned Ward had transferred assets into two trusts that benefited Alfred and Betty Moore and other beneficiaries.
- Society sued Ward and the beneficiaries in federal court, asserting claims including fraud and fraudulent transfer.
- In 2006, the court granted summary judgment for the beneficiaries on the fraud claim but denied summary judgment on the fraudulent-transfer claim, leaving that claim for resolution.
- The parties agreed to a hybrid ADR procedure combining arbitration and mediation to resolve the remaining fraudulent-transfer dispute.
- The parties selected one neutral, Lawrence Glassmann, to serve in both roles: arbitrator first and then mediator.
- Under the agreed structure, Glassmann conducted the arbitration and issued a decision that remained confidential while the mediation proceeded.
- During the mediation, on February 20, 2006, Glassmann emailed Society with his evaluation of strengths and weaknesses in Society’s case, discussed laches and a separate dispute between the parties, and urged settlement.
- The mediation did not resolve the case, and the arbitration decision was then disclosed; Glassmann ruled for the beneficiaries and assessed arbitration costs against Society.
- Society moved to vacate the award, arguing the February 20 email showed Glassmann relied on matters outside the arbitration record.
- The beneficiaries moved to strike the email, arguing it was a confidential mediation communication and could not be used in the vacatur proceeding.
- Society opposed the motion to strike, arguing the email was not privileged and that mediation privilege should not apply in a combined arbitration–mediation arrangement.
Issues
- Whether the neutral’s February 20, 2006 email, sent during the mediation phase of the agreed hybrid procedure, was a confidential mediation communication that should be excluded from the court record and from consideration.
- Whether Society established grounds under the Federal Arbitration Act to vacate the arbitration award based on alleged reliance on extra-record matters, misconduct, or partiality.
Decision
- The court treated the February 20 email as a confidential mediation communication and granted the beneficiaries’ request to strike or exclude it from the record and from consideration in the post-award motion practice.
- The court denied Society’s motion to vacate the arbitration award.
- The arbitration award in favor of the beneficiaries, including the cost assessment, remained in effect.
Legal Principles
- Courts may exclude communications made during mediation from later judicial proceedings when confidentiality is part of the parties’ mediation arrangement and is consistent with the function of mediation.
- In a hybrid procedure where one neutral serves as arbitrator and mediator, communications made during the mediation phase may remain confidential even though the same neutral issued the arbitration decision.
- Vacatur under the Federal Arbitration Act is limited to narrow statutory grounds; dissatisfaction with the merits of the award, or speculation about what the arbitrator considered, is not enough.
- A party seeking vacatur must support its challenge with admissible evidence; a court may refuse to consider evidence that is barred by mediation confidentiality.
- Evaluative settlement communications by a mediator during mediation, including candid comments about a party’s litigation risks, do not by themselves establish “evident partiality” or other FAA misconduct sufficient to overturn an award.
Conclusion
Society of Lloyd’s v. Moore held that a mediator-arbitrator’s evaluative email sent during the mediation portion of a med-arb process was confidential and could not be used to attack the arbitration award; without that email (and in any event under the FAA’s narrow vacatur standards), Society failed to justify vacatur, so the court left the award for the beneficiaries intact.